If you took out a ‘piggyback’ second mortgage (aka a ‘junior-lien loan’) to cover, say, your down payment or private mortgage insurance (PMI), then you may have problems if you need a loan modification. Read the rest of this entry »

There was a very good article about the US economy in general–and mortgages in particular–in the Times this morning. No, not the New York Times or the Los Angeles Times. It was in the original Times, which was first published in 1785 in London, England. Maybe you need to view things from across the Atlantic to get some perspective on our current financial plight.

Anyway, I urge you to read the piece. It’s all about the Fed’s latest policy of ‘quantitative easing’. Never heard of it? Me neither, up until very recently. But bankers do tend to use dry language, even to describe their most radical initiatives.

And quantitative easing is sure radical. It is the printing of vast amounts of money to buy up long-term debt-mortgage securities and government bonds. And if there’s a grain of truth in Milton Friedman’s monetarist theories, that can only mean inflation.

Perhaps we could use a dose of inflation to kick-start the mortgage and real estate markets. Maybe the alternative, stagflation, is even worse. The Times isn’t so sure. It says:

Quantitative easing is, in essence, what you do as a central bank when you have run out of things to do to avert catastrophe. It is that moment in the horror movie when you are backed up into the kitchen by the intruder and you start pulling out the kitchen sink as your last weapon.

It was a record-setting week all around, which adds up to good news for mortgage shoppers:

• The Federal Reserve lowered the Fed funds rate to a range of 0% to 0.25%
• It was announced that the Consumer Price Index fell by a record 1.7% in November
• Oil plunged to below $40 a barrel
• 30-year mortgage rates fell to 5.19%, the lowest level on record

While economic weakness is enough to give some home buyers pause, it is important to remember this same economic weakness is creating the extraordinary buying opportunity.

Read the rest of this entry »

Late yesterday (Tuesday) afternoon, the Federal Reserve slashed its target for the overnight federal funds rate to a range of 0 to 0.25 percent. That may sound like meaningless gobbledygook, but it’s not. It’s an all-time record low. Read the rest of this entry »

This week’s mortgage news was dominated by a dramatic drop in mortgage rates triggered by a new Federal Reserve approach to the financial crisis.

Of all the actions taken to address this crisis, none has had such immediate and tangible effects. Neither lowering Fed rates nor providing direct financial support to lenders seemed to make so much as a ripple in the credit markets. However, on news of this latest Fed program, 30-year mortgage rates dropped the better part of a full percentage point, falling near their all-time lows.

The Fed has announced that it will buy $600 billion in existing, mortgage-backed debt. This move both frees up capital for new lending, and gives lenders renewed confidence to make loans. It is the latter especially that accounts for the immediate drop in interest rates.

It is worth a closer look at what this action will and won’t accomplish, but in the short term it is undeniable that it has created a rare opportunity for home buyers and people who want to refinance. 

Read the rest of this entry »

By far, the dominant news story this week was the election of Barack Obama as the 44th President of the United States. While people have different ideological views on what this means to the nation, it is also natural to view any news of this magnitude through a lens of personal self-interest. For anyone contemplating buying a home, the question of self-interest that comes to mind is: what will an Obama Administration mean to mortgage rates?

Specifically:

• What will be the impact of Obama on the current financial crisis?
• What will be the impact of Obama’s long-range fiscal policies?

Looking at the recent news provides some perspectives on what the Obama Presidency will mean for mortgage rates, both short-term and long-term.

Read the rest of this entry »

To much fanfare, the Federal Reserve cut interest rates on October 29th. That was supposed to be this week’s Halloween treat for the markets. The trick came the next day, when Freddie Mac’s survey of mortgage rates revealed that 30-year rates had risen sharply for the week. 

So what gives? A clue to why market rates moved contrary to the federal funds rate could be found in two other pieces of news:

• The housing market continued to be weak, as one survey of major housing markets saw prices extent their slide to 25 consecutive months
• The U.S. dollar showed signs of weakness which were exacerbated by the cut in federal funds rates.

For the time being then, despite the Fed’s actions, things got tougher for borrowers rather than easier. This highlights some realities of what the Fed can and cannot do.

Read the rest of this entry »

As expected, mortgage rates continued their manic behavior, heading downward this week as focus shifted to the likelihood of recession: 

• A parade of bad earnings reports by U.S. companies created a growing impression that a recession may have already begun.
• The effect of economic weakness and falling oil prices was evidenced even more in the bond market than in mortgage rates, as 10-year Treasury yields fell nearly half a percent in just over a week.
• While the economic malaise had clearly spread throughout the economy, the source of the trouble — the housing market — continued to struggle. Foreclosures rose yet again in the third quarter of 2008, and new home construction slowed to the weakest level since 1991.

Certainly, this is the most troubling economic environment in a generation — but one with at least some glimmer of hope.

Read the rest of this entry »

Current events give a good demonstration of what really drives market interest rates:

• The Federal Reserve decided to leave short-term rates unchanged, at 2.0%
• And yet, thirty-year mortgage rates have eased off their recent highs over the past two weeks

The reason for the drop in mortgage rates can be traced to a third significant development:

• The price of oil slid to around the $120 a barrel mark, some 18% below its peak of $147

All of which suggests that potential homebuyers — or mortgage refinancers — would do well to keep their eyes on the price of oil in the weeks ahead. 

Read the rest of this entry »

There were mixed messages for borrowers in this week’s mortgage news, but there was certainly no shortage of headline-worthy stories:

• The U.S. Federal Reserve Board released a new set of mortgage lending guidelines on July 14th, designed to reform some practices that have been associated with the current lending crisis
• Leading government-sponsored mortgage financers Fannie Mae and Freddie Mac struggled to fend of rumors that they did not have enough liquidity to survive without a bail-out
• Perhaps more quietly — but of grave concern with regard to mortgage rates — inflation continued to surge, with very high readings for both wholesale and consumer price increases in June

The message on balance was that potential mortgage borrowers may not want to delay exploring their options, as long as they make educated choices about their loans.

Read the rest of this entry »